Consumer spending is expected to grow strongly in 2021-22 as confidence lifts and households draw down on savings, according to the latest Deloitte Access Economics retail forecasts.
But retailers will have to compete for consumers’ dollars as more opportunities for spending open up following the downturn in the 2020 pandemic year.
Australian retail spending has surged through most of 2020-21 benefiting from captured consumers who had little else to spend on through the pandemic.
However, those retailers who profited from a restricted economy are likely to face headwinds in the new financial year.
Deloitte Access Economics’ latest quarterly Retail Forecasts subscriber report says growth in retail spending is expected to hit 5.9% in 2020-21, the highest growth seen in a Decade.
However, the forecast for 2021-22 growth is a more modest 0.9%.
Non-food industries will likely experience the greatest slowdown in retail spending into 2021-22, especially clothing and household goods retailing.
The strong outlook for spending relies on households drawing on any war chest of savings as fiscal stimulus measures unwind and income growth remains muted.
David Rumbens, Deloitte Access Economics partner, says the next shift in consumer spending is underway.
“Australian consumers have more options for spending with the easing of restrictions and a need for social contact is supporting eating out and other activities at the expense of other retail spending,” he says.
“March quarter data shows that that shift is already underway, with retail spending growth slowing from the heady days of late 2020.
“On the other hand, and with Victoria’s recent lockdown the most recent case in point, we are not necessarily snapping back to an open society.
“With international borders still closed for another year, and city-wide lockdowns still happening, overall, retailers can expect sales to remain well above pre-COVID levels, despite a slowdown in spending growth over 2021-22.
“The signs so far are that consumers are willing and able to play their part in Australia’s economic recovery, but the hit to disposable income, limited population growth and the ongoing vaccine rollout place some risks on that growth for 2021-22.”
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